A January deadline with wider consequences

While this annual rush is familiar, the implications this year go beyond a simple administrative backlog. Automatic penalties, rising interest rates and limited access to HMRC support are combining to create a costly risk for individuals and businesses alike.

The policy context: how the penalty system works

Robert Salter, Director, explains the scale of the issue:

According to HMRC, at least 3 million taxpayers still need to file their Self-Assessment Tax Return before the 31st January deadline. The late submission of a return when HMRC have issued someone with a clear ‘notice to file’ automatically results in a taxpayer facing a £100 late filing penalty.

This is the case even where someone can subsequently show that no tax was due or even a tax refund was due.

For HMRC, this approach is designed to enforce compliance and administrative certainty. For taxpayers, however, it can feel disproportionate, particularly where filing obligations are no longer appropriate.

Who is most exposed and why mistakes happen

A significant group at risk includes individuals who previously had self-employed or rental income, but whose financial affairs are now fully taxed through PAYE.

Which is a concern for people that have received a ‘notice to file’ from HMRC incorrectly, as they no longer have trading or letting income and are having all of their income automatically accounted for via PAYE.

In theory, HMRC will withdraw a filing obligation where it is no longer required. In practice, timing is everything.

But while HMRC will cancel a tax return filing obligations when there should be no additional income tax due, it can be very difficult to speak with a HMRC official this close to the 31st January deadline.

This highlights a broader structural issue: HMRC’s systems remain highly rules-driven, while access to human intervention, particularly at peak times is limited. For businesses and individuals, this creates a compliance environment where practical risk can outweigh technical correctness.

The pragmatic approach: file first, resolve later

For many taxpayers it will be easier to file a return in the next few days, even if there are no income or capital gains to report. As the timely submission of a tax return ensures that no late filing penalty will be charged by the Revenue.

From a business perspective, this reflects a wider compliance reality: when deadlines are immovable and penalties automatic, defensive filing can be the most cost-effective option – even where the underlying obligation is disputed.

Payment deadlines and the rising cost of delay

However, it is not only the tax return itself which needs to be submitted by the 31st January filing deadline. Any income tax, capital gains tax and class 4 National Insurance Contributions (NICs) which are owed must be paid.

If the taxes due aren’t settled by the 31st January deadline, HMRC will impose late payment interest, at a relatively punitive rate of 7.75%.

Robert concludes:

If taxpayers still have taxes underpaid at the end of February, the Revenue will automatically add a 5% surcharge on the amount that they need to settle.

For owner-managed businesses, partners and higher earners, these charges can become significant – particularly where cash flow planning has not anticipated a January liability.

Why this matters for businesses and individuals

Beyond the immediate penalties, the Self-Assessment deadline highlights broader themes relevant to businesses:

• Compliance risk is increasingly automated
• Interest rates have changed the economics of late payment
• Administrative friction at HMRC means proactive planning matters more than ever

For individuals, especially those with changing income profiles, relying on assumptions about filing obligations can prove costly.

What you should consider / do next

Check whether you have received a ‘notice to file’ – this legally triggers the obligation, even if you believe no tax is due.

File by 31 January wherever possible, even if the return is nil or provisional, to avoid automatic penalties.

Ensure funds are available to settle any tax due or explore time-to-pay options early rather than after the deadline.

Review ongoing filing obligations, particularly if your income sources have changed, to avoid unnecessary returns in future years.

Seek professional advice if you are unsure, the cost of guidance is often far lower than penalties, interest and surcharges.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Robert Salter using the form below.